City Council Special Meeting - 555 Kelly Ave

MINUTES CITY OF HALF MOON BAY CITY COUNCIL TUESDAY, APRIL 28, 2026 SPECIAL MEETING ADCOCK COMMUNITY CENTER, 535 KELLY AVENUE 1. CONVENE SPECIAL MEETING / ROLL CALL Mayor Ruddock called the Special Meeting to order at approximately 6:00 p.m. Interim City Clerk Rodriguez did roll call, all Councilmembers were present, Councilmember Brownstone attended via teleconference. Councilmember Nagengast made a statement before the meeting began. 2. 555 KELLY AFFORDABLE HOUSING PROJECT 2.A INTRODUCTION OF AN ORDINANCE FOR THE 555 KELLY AFFORDABLE HOUSING PROJECT, APPROVING THE AFFORDABLE HOUSING AND PROPERTY DISPOSITION AGREEMENT AND GROUND LEASE AND OTHER AGREEMENTS AND ADOPTING A RESOLUTION APPROVING A GRANT AGREEMENT Staff presented their staff report and Mayor Ruddock opened the public hearing. The following individuals addressed the council: 1. Mike Ferreira 2. Sandy Vella 3. Sophia Layne 4. Chris Thibodeaux 5. Alice Linsmeier 6. Gloria Stofan 7. Roberta Gelt 8. Dr. Belinda Hernandez Arriaga 9. April Vargas 10. Dan Haggerty 11. Bill Heavlin 12. Noreen Cooper Heavlin 13. Evelyn Stivers 14. Lee Gray 15. Art Hoffmayer 16. Lenny Mendonca 17. Diana Reddy

April 28, 2026 City Council Special Meeting Minutes Page 2 of 2 18. Rev Lisa Warner Carey 19. Christy Samuels 20. Juslyn Manalo 21. Carolina Carbajal 22. Vaughn Harrison 23. David Rokosky 24. Joanne Rokosky 25. Rabbi Moshe Heyn 26. Joaquin Jimenez 27. Linda B Goldstein 28. Chip Goldstein 29. Harvey Rarback 30. Bobbi Radley 31. Rick Hernandez 32. Nancy Fontana 33. Suzanne Moore 34. Rogelio Nabor Martinez 35. Salomon Nabor 36. Lynette Curthoys 37. Tony Serrano 38. Rick Bonilla 39. Curno Newmeyer 40. Jennifer Moore 41. Rocio Avila 42. RJ Jennings 43. Cid Young 44. Rita Mancera 45. Pati Ramirez 46. Sandra Sencion 47. Jordan Grimes Mayor Ruddock closed the public hearing. RECESS Mayor Ruddock called a recess at approximately 8:24 p.m. The meeting reconvened at approximately 8:44 p.m. with all Councilmembers present. Council asked clarifying questions of staff and Mercy Housing. RECESS

April 28, 2026 City Council Special Meeting Minutes Page 2 of 2 Mayor Ruddock called a recess at approximately 10:00 p.m. The meeting reconvened at approximately 10:47 p.m. with all Councilmembers present. Interim City Attorney and Mercy Housing staff provided answers to the clarifying questions of City Council. MOTION Vice Mayor Penrose moved and Councilmember Brownstone seconded a motion Conduct a public hearing and introduce the first reading of an ordinance of the City of Half Moon Bay approving the Affordable Housing and Property Disposition Agreement, Ground Lease of Real Property for a Term of 99 Years, Memorandum of Ground Lease, Affordable Housing Regulatory Agreement and Declaration of Restrictive Covenants (Regulatory Agreement) and Other Ancillary Agreements between the City of Half Moon Bay and Mercy Housing California 110, L.P., for the Senior affordable 40-Unit Residential Project for Agricultural Workers, Located at 535 and 555 Kelly Avenue (APNs: 056-150-220 (Partial) and 056-150-200), including 2,653 square feet of Community Serving Space; Authorizing the City Manager to Execute the Agreements and Take Other Actions Necessary to Implement the Foregoing Agreements; and Finding the Approval of the Agreements and Related actions Exempt from Review under the California Environmental Quality Act (CEQA) Pursuant to CEQA Guidelines section 15332 (Infill Projects) to include the revisions discussed by staff and Mercy Housing. The motion carried 4-1 with Councilmember Nagengast voting no. MOTION Mayor Ruddock moved and Vice Mayor Ruddock seconded a motion to postpone item 2 to the May 5, 2026 Regular City Council Meeting. The motion carried unanimously. 3. ADJOURN SPECIAL MEETING Mayor Ruddock adjourned the Special Meeting at approximately 11:20 p.m. Respectfully Submitted: Maggie Rodriguez, Interim City Clerk *Approved by the City Council at the May 5, 2026 Regular meeting.

CITY COUNCIL AGENDA SPECIAL MEETING CITY OF HALF MOON BAY TUESDAY, APRIL 28, 2026 6:00 PM TED ADCOCK COMMUNITY CENTER Debbie Ruddock , Mayor 535 KELLY AVENUE Deborah Penrose, Vice Mayor HALF MOON BAY, CA 94019 Robert Brownstone, Councilmember Patric Jonsson, Councilmember Paul Nagengast, Councilmember COUNCILMEMBER BROWNSTONE WILL ATTEND REMOTELY FROM ULICA NENADA MATAKA #24, ZADAR, ZADARSKA ŽUPANIJA 23000, CROATIA This agenda contains a brief description of each item to be considered. Those wishing to address the City Council on any matter not listed on the agenda, but within the jurisdiction of the City Council to resolve, may come forward to the podium during the Public Forum portion of the agenda and will have a maximum of three minutes to discuss their item. Comments on Consent Calendar items should be made during the Public Forum section of the agenda. Those wishing to speak on a Business or Public Hearing matter will be called forward at the appropriate time during that item’s consideration. Please Note: Anyone wishing to present materials to the City Council, please submit seven copies to the City Clerk. Copies of written documentation relating to each item of business on the agenda are on file in the Office of the City Clerk at City Hall where they are available for public inspection. If requested, the agenda shall be available in appropriate alternative formats to persons with a disability, as required by Section 202 of the Americans with Disabilities Act of 1990 (42 U.S.C. Sec. 12132.) Information may be obtained by calling 650-726-8271. In compliance with the Americans with Disabilities Act, special assistance for participation in this meeting can be obtained by contacting the City Clerk’s Office at 650-726-8271. A 48-hour notification will enable the City to make reasonable accommodations to ensure accessibility to this meeting (28 CFR 35.102-35.104 ADA Title II). http://halfmoonbay.gov HYBRID MEETING PUBLIC COMMENT PARTICIPATION PROTOCOLS This closed session meeting will take public comment in-person and via Zoom. Remote participation is provided as a supplemental way to provide public comment, but this method does not always work. The public is encouraged to attend in person to ensure full participation. All Councilmembers and staff will participate in person. During any public comment portions, attendees may use the “raise your hand” feature and will be called upon and unmuted when it is their turn to speak. Please click to join the webinar: https://us06web.zoom.us/j/85007693509 or join by phone at 669-900-9128, using Webinar ID 850 0769 3509. If joining by phone, use *9 to raise your hand, *6 to mute and unmute.

1. CONVENE SPECIAL MEETING / ROLL CALL 2. 555 KELLY AFFORDABLE HOUSING PROJECT 2.A INTRODUCTION OF AN ORDINANCE FOR THE 555 KELLY AFFORDABLE HOUSING PROJECT, APPROVING THE AFFORDABLE HOUSING AND PROPERTY DISPOSITION AGREEMENT AND GROUND LEASE AND OTHER AGREEMENTS AND ADOPTING A RESOLUTION APPROVING A GRANT AGREEMENT Staff Recommendation: 1) Conduct a public hearing and introduce the first reading of an ordinance of the City of Half Moon Bay approving the Affordable Housing and Property Disposition Agreement, Ground Lease of Real Property for a Term of 99 Years, Memorandum of Ground Lease, Affordable Housing Regulatory Agreement and Declaration of Restrictive Covenants (Regulatory Agreement) and Other Ancillary Agreements between the City of Half Moon Bay and Mercy Housing California 110, L.P., for the Senior affordable 40-Unit Residential Project for Agricultural Workers, Located at 535 and 555 Kelly Avenue (APNs: 056-150- 220 (Partial) and 056-150-200), including 2,653 square feet of Community Serving Space; Authorizing the City Manager to Execute the Agreements and Take Other Actions Necessary to Implement the Foregoing Agreements; and Finding the Approval of the Agreements and Related actions Exempt from Review under the California Environmental Quality Act (CEQA) Pursuant to CEQA Guidelines section 15332 (Infill Projects) and, 2) Adopt a resolution approving a Grant Agreement Between the City of Half Moon Bay and Mercy Housing California for Two Million Dollars ($2,000,000) in Funding Procured in Fiscal Year 2023 by Senator Josh Becker; Authorizing the City Manager to Execute the Agreement; and finding approval of the Grant Agreement Exempt from Review under the California Environmental Quality Act (CEQA) Pursuant to CEQA Guidelines section 15332 (Infill Projects). STAFF REPORT ATTACHMENT 1 - Ordinance and Resolution ATTACHMENT 2 - Affordable Housing and Property Disposition Agreement (AHPDA) ATTACHMENT 3 - Ground Lease ATTACHMENT 4 - Regulatory Agreement ATTACHMENT 5 - Grant Agreement ATTACHMENT 6 - Memorandum of Lease ATTACHMENT 7 - Presentation from March 18, 2026

ATTACHMENT 8 - Redline Ground Lease ATTACHMENT 9 - Redline AHPDA ATTACHMENT 10 - Estimated Costs and Financing Plan ATTACHMENT 11 - Property Management Agreement Draft and Preliminary Services Plan ATTACHMENT 12 - Letter of Intent draft for ALAS Sub-Lease ATTACHMENT 13 - Parking Diagrams and Maps PUBLIC COMMENTS RECEIVED BEFORE 4:00 P.M. APRIL 28, 2026 CITY COUNCIL QUESTIONS - 555 KELLY ADDITIONAL MERCY DOCUMENTS RECEIVED APRIL 28, 2026 3. ADJOURN SPECIAL MEETING

CITY COUNCIL AGENDA SPECIAL MEETING CITY OF HALF MOON BAY TUESDAY, APRIL 28, 2026 6:00 PM TED ADCOCK COMMUNITY CENTER Debbie Ruddock , Mayor 535 KELLY AVENUE Deborah Penrose, Vice Mayor HALF MOON BAY, CA 94019 Robert Brownstone, Councilmember Patric Jonsson, Councilmember Paul Nagengast, Councilmember COUNCILMEMBER BROWNSTONE WILL ATTEND REMOTELY FROM ULICA NENADA MATAKA #24, ZADAR, ZADARSKA ŽUPANIJA 23000, CROATIA This agenda contains a brief description of each item to be considered. Those wishing to address the City Council on any matter not listed on the agenda, but within the jurisdiction of the City Council to resolve, may come forward to the podium during the Public Forum portion of the agenda and will have a maximum of three minutes to discuss their item. Comments on Consent Calendar items should be made during the Public Forum section of the agenda. Those wishing to speak on a Business or Public Hearing matter will be called forward at the appropriate time during that item’s consideration. Please Note: Anyone wishing to present materials to the City Council, please submit seven copies to the City Clerk. Copies of written documentation relating to each item of business on the agenda are on file in the Office of the City Clerk at City Hall where they are available for public inspection. If requested, the agenda shall be available in appropriate alternative formats to persons with a disability, as required by Section 202 of the Americans with Disabilities Act of 1990 (42 U.S.C. Sec. 12132.) Information may be obtained by calling 650-726-8271. In compliance with the Americans with Disabilities Act, special assistance for participation in this meeting can be obtained by contacting the City Clerk’s Office at 650-726-8271. A 48-hour notification will enable the City to make reasonable accommodations to ensure accessibility to this meeting (28 CFR 35.102-35.104 ADA Title II). http://halfmoonbay.gov HYBRID MEETING PUBLIC COMMENT PARTICIPATION PROTOCOLS This closed session meeting will take public comment in-person and via Zoom. Remote participation is provided as a supplemental way to provide public comment, but this method does not always work. The public is encouraged to attend in person to ensure full participation. All Councilmembers and staff will participate in person. During any public comment portions, attendees may use the “raise your hand” feature and will be called upon and unmuted when it is their turn to speak. Please click to join the webinar: https://us06web.zoom.us/j/85007693509 or join by phone at 669-900-9128, using Webinar ID 850 0769 3509. If joining by phone, use *9 to raise your hand, *6 to mute and unmute. 1

1. CONVENE SPECIAL MEETING / ROLL CALL 2. 555 KELLY AFFORDABLE HOUSING PROJECT 2.A INTRODUCTION OF AN ORDINANCE FOR THE 555 KELLY AFFORDABLE HOUSING PROJECT, APPROVING THE AFFORDABLE HOUSING AND PROPERTY DISPOSITION AGREEMENT AND GROUND LEASE AND OTHER AGREEMENTS AND ADOPTING A RESOLUTION APPROVING A GRANT AGREEMENT Staff Recommendation: 1) Conduct a public hearing and introduce the first reading of an ordinance of the City of Half Moon Bay approving the Affordable Housing and Property Disposition Agreement, Ground Lease of Real Property for a Term of 99 Years, Memorandum of Ground Lease, Affordable Housing Regulatory Agreement and Declaration of Restrictive Covenants (Regulatory Agreement) and Other Ancillary Agreements between the City of Half Moon Bay and Mercy Housing California 110, L.P., for the Senior affordable 40-Unit Residential Project for Agricultural Workers, Located at 535 and 555 Kelly Avenue (APNs: 056-150- 220 (Partial) and 056-150-200), including 2,653 square feet of Community Serving Space; Authorizing the City Manager to Execute the Agreements and Take Other Actions Necessary to Implement the Foregoing Agreements; and Finding the Approval of the Agreements and Related actions Exempt from Review under the California Environmental Quality Act (CEQA) Pursuant to CEQA Guidelines section 15332 (Infill Projects) and, 2) Adopt a resolution approving a Grant Agreement Between the City of Half Moon Bay and Mercy Housing California for Two Million Dollars ($2,000,000) in Funding Procured in Fiscal Year 2023 by Senator Josh Becker; Authorizing the City Manager to Execute the Agreement; and finding approval of the Grant Agreement Exempt from Review under the California Environmental Quality Act (CEQA) Pursuant to CEQA Guidelines section 15332 (Infill Projects). STAFF REPORT ATTACHMENT 1 - Ordinance and Resolution ATTACHMENT 2 - Affordable Housing and Property Disposition Agreement (AHPDA) ATTACHMENT 3 - Ground Lease ATTACHMENT 4 - Regulatory Agreement ATTACHMENT 5 - Grant Agreement ATTACHMENT 6 - Memorandum of Lease ATTACHMENT 7 - Presentation from March 18, 2026 2

ATTACHMENT 8 - Redline Ground Lease ATTACHMENT 9 - Redline AHPDA ATTACHMENT 10 - Estimated Costs and Financing Plan ATTACHMENT 11 - Property Management Agreement Draft and Preliminary Services Plan ATTACHMENT 12 - Letter of Intent draft for ALAS Sub-Lease ATTACHMENT 13 - Parking Diagrams and Maps PUBLIC COMMENTS RECEIVED BEFORE 4:00 P.M. APRIL 28, 2026 CITY COUNCIL QUESTIONS - 555 KELLY ADDITIONAL MERCY DOCUMENTS RECEIVED APRIL 28, 2026 3. ADJOURN SPECIAL MEETING 3

Page 1 of 10 BUSINESS OF THE COUNCIL OF THE CITY OF HALF MOON BAY AGENDA REPORT For meeting of: April 28, 2026 TO: Honorable Mayor and City Council VIA: Mathew Chidester, City Manager FROM: Denise Bazzano, Interim City Attorney Leslie Lacko, Community Development Director TITLE: INTRODUCTION OF AN ORDINANCE FOR THE 555 KELLY AFFORDABLE HOUSING PROJECT, APPROVING THE AFFORDABLE HOUSING AND PROPERTY DISPOSI- TION AGREEMENT AND GROUND LEASE AND OTHER AGREEMENTS AND ADOPTING A RESOLUTION APPROVING A GRANT AGREEMENT ___________________________________________________________________________ RECOMMENDATION: 1. Conduct a public hearing and introduce the first reading of an ordinance of the City of Half Moon Bay approving the Affordable Housing and Property Disposition Agreement, Ground Lease of Real Property for a Term of 99 Years, Memorandum of Ground Lease, Affordable Housing Regulatory Agreement and Declaration of Restrictive Covenants (Regulatory Agreement) and Other Ancillary Agreements between the City of Half Moon Bay and Mercy Housing California 110, L.P., for the Senior affordable 40-Unit Residential Project for Agricultural Workers, Located at 535 and 555 Kelly Avenue (APNs: 056-150- 220 (Partial) and 056-150-200), including 2,653 square feet of Community Serving Space; Authorizing the City Manager to Execute the Agreements and Take Other Actions Neces- sary to Implement the Foregoing Agreements; and Finding the Approval of the Agree- ments and Related actions Exempt from Review under the California Environmental Quality Act (CEQA) Pursuant to CEQA Guidelines section 15332 (Infill Projects). 2. Adopt a resolution approving a Grant Agreement Between the City of Half Moon Bay and Mercy Housing California for Two Million Dollars ($2,000,000) in Funding Procured in Fiscal Year 2023 by Senator Josh Becker; Authorizing the City Manager to Execute the Agreement; and finding approval of the Grant Agreement Exempt from Review under the California Environmental Quality Act (CEQA) Pursuant to CEQA Guidelines section 15332 (Infill Projects). FISCAL IMPACT: There is no direct fiscal impact to the General Fund associated with the recommendation and approval of the Affordable Housing and Property Disposition Agreement (AHPDA), Ground Lease, Memorandum of Ground Lease, and Regulatory Agreement. 4

Page 2 of 10 The approval of the Grant Agreement will result in a decrease in the Affordable Housing Fund (126) in an amount not to exceed $2 million. The City previously committed $1 million through a Predevelopment Loan Agreement with Mercy Housing (Mercy) from the City’s Affordable Housing Fund, which was allowed to expire due to the City’s receipt of $2 million in State funding for the affordable housing project located at 535-555 Kelly Avenue (Project), which is now secured in the Affordable Housing Fund. The proposed Grant Agreement would authorize Mercy to make certain expenditures related to the Project and receive reimbursement from the City utilizing the State of California (State) funding, up to $2 million. The City received additional predevelopment funding from the County of San Mateo (County) in the amount of $1.5 million for the Project, most of which supported the design and entitlement work to date through a separate agreement with Mercy. Mercy will acquire and administer any additional funding necessary to complete the Project. STRATEGIC ELEMENTS: This action supports the Healthy Communities and Public Safety and Inclusive Governance Elements of the Strategic Plan. BACKGROUND: 555 Kelly Avenue (APN 056-150-200) is a 6,200 square foot parcel, acquired by the City in September 2017. The 535 Kelly Avenue (APN 056-150-220) parcel is also owned by the City and currently used as the Ted Adcock Community Center. In February 2022, the City issued a Request for Proposals (RFQ) to solicit affordable housing development interest for the site, which included 555 Kelly and a portion of 535 Kelly Avenue (collectively referred to as the “Site” or “Property”). The City received only one submittal from a two- agency team comprised of Mercy Housing California (Mercy) and Ayudando Latinos A Soñar (ALAS). On October 4, 2022, the City Council declared the Site as exempt surplus land, pursuant to Government Code Sections 54221(b) and 54221(f)(1)(A), as surplus land that is to be developed for affordable housing. The California Housing and Community Development Department (HCD) confirmed this determination. The City also entered into an Exclusive Negotiations Agreement (ENA) with Mercy to enable predevelopment activities for the proposed affordable housing and provide time in which to negotiate a ground lease and a disposition agreement between the parties. Subsequently, the City and Mercy entered into agreements related to funding from the City and the County, to financially support the predevelopment activities, which included conceptual design, community outreach, design development, public meetings, permitting, and the development agreement. On May 14, 2024, following several public hearings, the Planning Commission conditionally approved a Coastal Development Permit (CDP) for the Project (PDP-23-034). The Planning Commission found that the Project, as modified by the conditions, was in conformance with the Local Coastal Program with the exception of density, height, and parking requirements, which 5

Page 3 of 10 were waived by State Density Bonus Law1. Following the Planning Commission’s action, three separate appeals to City Council were filed, challenging the Planning Commission’s decision to approve the CDP. On June 26, 2024, the City Council held a hearing and voted to deny the appeals, upholding the Planning Commission’s decision. The CDP authorized the following: a new five-story building with forty (40) residential units for senior or retired (age 55 plus) farmworkers that are deed restricted affordable to extremely low and very low-income households; a lot line adjustment to reconfigure the driveway at Kelly Avenue and enlarge the development parcel by utilizing the existing parking lot for the adjacent Ted Adcock Community Center (expanding the project site to approximately 16,395 square feet); on-site property management and resident-serving facilities; an 18-space ground-floor parking garage for residents; and additional off street parking adjacent to the Community Center. The full Project plan set, details the approved site layout, architectural elevations, building renderings, material and color details, design inspiration, concept landscape and planting plans, grading and civil sheets, and exhibits illustrating the proposed lot line adjustment. Additional information is available on the City’s Project page. Mercy also has a dedicated project website that includes an overview of development highlights, community outreach, and Project renderings at www.555kelly.org. The Project is currently estimated to cost a total of $41,632,665. Funds currently committed to the development consist of over $21 million from federal, state, and county sources, some of which are administered by the City. No City General Funds are currently committed to the Project, and the financing plan does not include funding from Half Moon Bay. In fall 2025, HCD announced a commitment of $13,350,000 in Serna Farmworker Grant funds for the Project. The updated Estimated Costs and Financing Plan are included as Attachment 10. For development to move forward on the Project, the City and Mercy’s affiliate, Mercy Housing California 110, L.P. (Mercy Housing) need to enter into an Affordable Housing and Property Dis- position Agreement (AHPDA), Ground Lease, and Regulatory Agreement, authorizing Mercy Housing’s long-term use of the City-owned land on which the building would be constructed and imposing the affordability requirements for the Project. Following the Council’s decision to uphold the Planning Commission’s approval in June 2024, the Council designated an Ad-Hoc Committee to work with Mercy on outstanding issues related to the proposed Ground Lease and AHPDA. The Committee met on multiple occasions from Oc- tober 2024 through October 2025 to discuss the primary outstanding issues and reported back to the full City Council in both closed sessions and public meetings. In October 2025, the City Council held a study session to review and discuss the terms and issues identified during the en- titlement process and Ad-Hoc committee meetings. 1 The waivers were available under State Density Bonus Law for the 100% affordable project based on a finding of proximity to a “major transit stop.” On December 16, 2024, the City Council adopted Resolution 2024-97, which recited AB 2553 (effective January 1, 2025), and resolved that, consistent with state statutory definitions, the City will no longer use on-demand transit to qualify a location as a major transit stop, unless directed otherwise by state law. 6

Page 4 of 10 At the October meeting, many of the terms that would be negotiated into the AHPDA and Lease were presented as well as details of discussions between the City and Mercy through the Ad Hoc process. These terms included: affordability requirements, eligibility requirements for occupancy of the units, local preferences for potential residents, age restrictions, rules for changes in tenancy, occupancy limits, the unit mix (studios, 1 and 2 bedrooms; numbers of each), building height, the proposed community resource center and community spaces, Mercy’s property management office spaces, parking resources and limitations, and the Lease rent and terms. Details on discussions around each of those areas were spelled out in the October 16, 2025 Staff Report. Also at the October meeting, questions were raised regarding ongoing work to address parking, traffic, and pedestrian safety concerns related to the Project’s location in the already busy Kelly Avenue commercial district. Questions were also raised about the current funding plan for the Project and long-term feasibility, concerns about the current political and economic landscape and how they might impact the Project, and the proposed lease payment of $1 per year. Proponents continued to encourage moving the Project forward and quickly, citing the continuing need for more affordable housing in the community, especially for the targeted population of senior and retired farmworkers. Ultimately, the Council directed Staff to continue to work with Mercy on the terms, and to return at a future meeting with drafts of the AHPDA and Lease incorporating the terms so that Council and the community could review the proposed terms in the context of the legal agreements. On March 18, 2026, a Study Session was held to review the draft AHPDA and draft Ground Lease. The templates for the documents had been significantly revised since they were provided to City staff in October, 2025. Some of the major revisions to the documents were highlighted in the presentation, including but not limited to, specifying a term for the Ground Lease of 99 years, clarifications to financing requirements, and adding a separate regulatory agreement requirement. The staff report and associated documents from the March 18 meeting, as well as the presentation (Attachment 7) contain additional details on discussions up to that point, and steps being taken to address traffic, bike and pedestrian safety, and parking. At the March meeting Councilmembers asked a number of questions relating to the terms of the draft AHPDA and Ground Lease and provided direction for improvements in a number of areas, including among other things, adding additional definitions to clarify some of the terms used in the AHPDA and Ground Lease. Since the March meeting, City staff, the City Attorney’s Office, and Mercy have had multiple meetings and discussed further revisions to the AHPDA and Ground Lease as well as the draft Regulatory Agreement and draft Grant Agreement, to address the comments from Council and to ensure clarity and consistency among the documents. Some of the major revisions to the draft Ground Lease and AHPDA since March are identified below (Attachments 8 and 9). 7

Page 5 of 10 AHPDA: • Added various definitions including “Agricultural Employment”, “Agricultural Worker”, “Disability”, “Senior”, and “Work Week”; • Changed references from “Director” to “City Manager” or “City”; • Revised the termination date of AHPDA from issuance of Temporary Certificate of Occupancy to recordation of Memorandum of Ground Lease; • Revised the provisions for the Community Serving Space and clarified its use, including language that the space be used for meetings and activities of the general public for no less than 16 hours per Work Week. Prior to occupancy, Mercy Housing and the City Manager will collaborate to determine appropriate activities and scheduling of the space; • Removed specific details about insurance requirements and added reference to insurance requirements in the Ground Lease to avoid duplication; • Revised compliance with prevailing wage requirements to specify that Mercy Housing shall pay prevailing wages; • Removed “reasonable” from a number of provisions requiring City or City Manager approval and added new provision in section 16.2 that specifies that City approvals shall mean the City Council unless it specifically states the City Manager shall approve. Section 16.2 also provides how phrases such as “shall not be unreasonably withheld,” “reasonable discretion” and “reasonably consider” are to be interpreted; and • Added a new provision in section 17.15 to specify that access to private, non-public areas of the property shall only be accessed by the County, State and Federal officials by consent of Tenant or, if no consent is granted, as required by law through a valid judicial warrant or other legal instrument mandating access. It also specifies that Mercy Housing would be responsible for compliance with applicable laws relating to immigration and would defend and indemnify the City from any legal challenges resulting from an alleged violation. Ground Lease Agreement: • Added various definitions including definitions of “Agricultural Employment”, “Agricultural Worker”, “Disability”, “Senior”, “Sublease”, and “Work Week”; • Changed references from “Director” to “City Manager” or “Landlord”; • Revised the provisions for the Community Serving Space and clarified its use, including language that the space be used for meetings and activities of the general public for no less than 16 hours per Work Week. Prior to occupancy, Mercy Housing and the City Manager will collaborate to determine appropriate activities and scheduling of the space; • Clarified provisions relating to Subleases by defining “Resource Center Subleases” and “Resident Subleases,” which are Subleases entered into between Mercy Housing and tenants and specified that the Landlord (City Council) would approve the final form of the Subleases; • Added language to require that the form of each Resident Sublease and the Resource Center Sublease also contain a provision prohibiting each subtenant from sub-subleasing; • Removed “reasonable” from a number of provisions requiring Landlord or City Manager approval and added new provision in section 22.27 that specifies that Landlord approvals shall mean the City Council unless it specifically states the City Manager shall approve. 8

Page 6 of 10 Section 22.27 also provides how phrases such as “shall not be unreasonably withheld,” “reasonable discretion” and “reasonably consider” are to be interpreted; • Added a new provision in section 22.28 to specify that access to private, non-public areas of the property shall only be accessed by the County, State and Federal officials by consent of Tenant or, if no consent is granted, as required by law through a valid judicial warrant or other legal instrument mandating access. It also specifies that Mercy Housing would be responsible for compliance with applicable laws relating to immigration and would defend and indemnify the City from any legal challenges resulting from an alleged violation; and • The Legal Description of the Property attached as Exhibit A to the Ground Lease was updated. DISCUSSION: Below is a summary of the various agreements that the Council is being asked to consider. AHPDA The proposed AHPDA and the Ground Lease are drafted to run sequentially. Initially, the AHPDA is the controlling document. The AHPDA controls the relationship between the City and Mercy during the pre-development period and establishes conditions precedent that must be met by Mercy Housing in order for Mercy Housing to be allowed to enter into the Ground Lease for the Property with the City. Those conditions precedent are identified in section 7.2 of the AHPDA and summarized as follows: • Submission of Mercy Housing’s organizational documents; • Submission of documents evidencing the required liability insurance; • Evidence of project financing sufficient to cover the Project’s Costs as shown in the Final Project Budget; • Construction Contract; • Final Construction Documents; • Building Permit; • Evidence that construction is ready to commence; • Management Agreement for management of Project; • Executed Regulatory Agreement; • Executed Ground Lease and Memorandum of Ground Lease; • Title Policy; • Approval of Proposed Final Project Budget and confirmation of total Project Cost; and • Submission of proposed program for the Community Serving Space. Section 7.2 provides that the foregoing conditions would be reviewed and determined by the City Manager. If any of the conditions precedent in section 7.2 are not satisfied, then the City may terminate the AHPDA and the Ground Lease would not commence. If, however, the conditions are satisfied, then the recordation of the Memorandum of Ground Lease would proceed. Once the Memorandum of Ground Lease is recorded, the AHPDA terminates and the Ground Lease becomes effective. 9

Page 7 of 10 Ground Lease The proposed Ground Lease is the document that establishes the contractual obligations imposed on Mercy Housing (as the Tenant) by the City (as the Landlord). The Ground Lease term would be for a period of 99 years and during that time, the City would act as the Landlord in leasing the Site. The Ground Lease requires that Mercy Housing pay rent to the City at a rate of $1 per year for the duration of the Ground Lease as consideration for the lease of real property. The draft Ground Lease requires Mercy Housing to among other things, construct and maintain the improvements on the Site. Mercy Housing is also required to perform a number of duties including obtaining certain insurance for the duration of the Ground Lease and operate t